How many expert opinions does it take to dismantle a government policy? One? Two? Three? Four? Keep counting.
To date, the Economic and Social Research Institute (ESRI), the Central Bank, the Institute of Professional Auctioneers and Valuers (IPAV), and a former secretary-general of the Department of Public Expenditure and Reform (DPER) have all criticised the Government’s proposed shared equity scheme, to no avail. The Housing Minister is determined to plough on.
In fact, speaking on RTÉ’s News at One yesterday, Minister Darragh O’Brien flatly denied there had been a notable level of criticism directed at the scheme, other than from the usual suspects. “There hasn’t actually been a lot of criticism, there has been some predictable criticism from the political side – the opposition,” he sniffed.
Let’s examine that. In September, the former secretary-general of DPER, Robert Watt, bluntly said lobbyists for the property industry were pushing the scheme because “it will increase prices”.
Meanwhile, another official in the department warned the scheme was “a demand-side measure which is unnecessary in a market like ours which is chronically undersupplied”.
In a meeting between the Department of Finance and Central Bank in September, the Central Bank warned it was concerned the measure “could impact on prices” and “it was not clear that the scheme will to any extent promote additional supply”.
The ESRI, in a presentation to the Dáil’s Housing Committee, concluded that “on balance, with the current supply shortages” any potential positive benefit of the scheme “will be outweighed by inflationary pressures”. Meanwhile, at the weekend, the IPAV derided the measure as “a grandiose way of getting around the Central Bank rules”.
If the minister cannot detect a hint of criticism in any of that commentary, then perhaps he needs to get his hearing or his eyesight checked.
When the ESRI spoke to the Housing Committee, it did so in the hope that its expertise would provide “an evidence base for interventions to address housing affordability”. The response from government members was to shoot the messengers and request that an opening statement, from housing expert Dr Conor O’Toole, be amended.
British MP and avowed Brexiteer Michael Gove infamously said “the people of this country have had enough of experts” and, when it comes to housing policy, our own Government seem to share a similar view.
The scheme will work here because the Government insists it will work. They can’t tell us exactly how, or why, but we should take their word for it – and ignore the cacophony of criticism coming from people with PhDs in housing policy.
At least there is one thing we can all agree on: there is an affordability crisis in the housing market. The price of a new home in Dublin for first-time buyers has nearly doubled, from €200,000 to €380,000, since 2012. This means a first-time buyer in Dublin needs an income of nearly €100,000 to purchase a home.
Clearly, this is out of reach for the majority of workers. The median price of a house in Dublin is nearly 10 times average annual earnings (€39,753). In the last year, the pandemic has depressed earnings for a large cohort of people even further – making the gap even harder to bridge.
This affordability crisis is, in turn, driving a rental crisis. In his address at the Housing Committee, Dr O’Toole noted that, pre-pandemic, 25pc of people in the private rental market were paying more than 30pc of their net income on rent while nearly 33pc, or 70,000 households, did not have enough money to cover a minimum standard of living after they paid rent.
“Given that these renters were more likely to be employed in those sectors most impacted by Covid-19, it is likely that the economic fallout from the pandemic will exacerbate existing affordability challenges,” he said.
In short, the situation is going to get even worse. The response from Government to this ongoing crisis has been unimaginative, to say the least.
This week the minister announced plans to mandate a requirement that new residential developments contain 10pc affordable homes as well as 10pc social housing. While this is positive, it is merely undoing a change by a former housing minister, Labour’s Alan Kelly, in 2015 when he reduced the cap from 20pc, social and affordable homes, to just 10pc. That was an unmitigated disaster, so now the policy is being reversed.
Tinkering with old policy solutions, while introducing new policies that have demonstrably failed elsewhere, does not instil much confidence in the Government’s ability to alleviate the housing crisis. Where are the big ideas? The innovative solutions that will be required to address the complex and manifold problems that are, by now, endemic in the housing market in this country?
Members of the ESRI were not being politically partisan when they raised concerns about the Government’s shared equity plan. They were pointing to a similar measure introduced in England and Wales which resulted in house prices increasing by 6pc in London, with no discernible increase in supply in the areas with acute shortages.
Saddling house buyers with additional debt in the form of a government equity loan, on top of an existing mortgage, is not the way to address an affordability crisis. All it does is ensure that prices remain unaffordable. In the words of a senior DPER official, “an effective affordable housing policy would deliver the right types of units in the right location at an appropriately affordable price”.
Where is the Government policy that will achieve that?